Fuel on the fire?
Reuters Finance News
Earnings From Retailers in Spotlight
Feb 18 2:57pm ET
By Brendan Intindola
NEW YORK (Reuters) - With the stock markets closed Monday in observance of the Presidents Day holiday and little economic data on the calendar, the direction of equities this week will be dictated by corporate earnings. And the gloomy parade is expected to continue.
Retailers dominate the quarterly earnings announcements this week, with bottom-line news from Home Depot Inc. and Wal-Mart Stores Inc. expected on Tuesday.
"The theme really seems to be earnings announcements and warnings. Starting in November, December, all these companies began announcing problems," said Barbara Marcin, portfolio manager of the Gabelli Blue Chip Value Fund, with $65 million in assets.
The only certain respite, it seems, from the earnings blues will be on the holiday, which marks the February birthdays of Abraham Lincoln and George Washington.
FROM BLEAK TO WORSE
"We had Home Depot, the auto makers, telecoms, techs, all talking about the sharpness and quickness of the slowdown. We are going to continue to see that, as we have seen it (last week) with Nortel and Hewlett-Packard," Marcin said.
Last month, Home Depot, the No. 1 home improvement retailer, announced it would miss earnings estimates for its fiscal fourth quarter as the effects of the slowing U.S. economy hampered sales.
This Thursday, J.C. Penney Co. Inc. , Liz Claiborne Inc. , Nordstrom Inc. and RadioShack Corp. all are set to release their quarterly earnings.
Joseph Kalinowski, equity strategist at earnings tracker First Call/Thomson Financial, said in a research note late Friday that "more confessions are on the horizon.
"It seems confession season is coming a little early this year," he added. "Nortel Networks, Dell Computer, and Hewlett-Packard have joined a surprisingly long list of those companies crumbling under the weight of this economic slowdown.
"If you think things appear bleak now, wait a few weeks. Things will get worse," Kalinowski said.
CONSUMER PRICE INDEX GRABS SPOTLIGHT
January's Consumer Price Index, set for release on Wednesday, will grab Wall Street's attention this week. The CPI report will have the spotlight almost all to itself in a week that's light on notable numbers, compared with last week's glut of economic data.
The CPI, the gauge of inflation at the retail or consumer level, will receive more than its usual close scrutiny after its wholesale counterpart, the Producer Price Index, released on Friday, in January showed its biggest one-month gain in more than a decade.
The Producer Price Index grew 1.1 percent last month, compared with the market's forecast for growth of just 0.3 percent. Skyrocketing prices for natural gas and residential electricity were blamed for the most of the leap in the overall PPI in January. The core PPI, which excludes volatile food and energy prices, jumped 0.7 percent, well above the expected gain of 0.1 percent.
"Now there is a lot of focus on the CPI, to see if the inflation has fed through to that level," said Don Ross, chief investment officer at National City Corp.
The PPI data helped stoke a sharp sell-off on Friday that pushed the Nasdaq composite down 1.8 percent for the week, while the Dow Jones industrial average edged up 0.16 percent. Year to date, the Nasdaq is down 1.8 percent, the Dow is up 0.11 percent, and the benchmark Standard & Poor's 500 index has lost 1.42 percent.
Among Federal Reserve Bank activities, San Francisco Fed President Robert Parry on Wednesday is scheduled to make the keynote speech before the National Association for Business Economics Bay Area Chapter.
Last Thursday, stocks rallied in part on U.S. central bankers' optimistic comments about an economic recovery.
Richmond Fed President Alfred Broaddus said the odds that the economy will recover soon are "reasonably high" while William Poole, the president of the Fed in St. Louis, said inflation remains under control even amid the latest economic uncertainty.
BAD TECH OUTLOOKS KICKED OFF PRE-PRESIDENTS DAY SALE
Weighing on last week's market were sour predictions from technology giants Nortel Networks Corp. and Hewlett-Packard Co.
On Thursday, computer and printer maker H-P posted first-quarter earnings that met its lowered target and warned that full-year earnings were likely to fall short of expectations.
H-P blamed a tough market in the United States and a slowing economy for hurting results in its consumer and commercial desktop personal computer business and in its printer hardware business in the latest quarter.
As for Canada's Nortel, the world's No. 1 supplier of fiber-optic telecom network equipment, stunned financial markets on Thursday, when it warned it would have lower revenues, a loss of 4 cents per share in the first quarter and will cut 4,000 more jobs. |
